{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/323/740/#25-recognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"323","topic_title":"Investments—Equity Method and Joint Ventures","subtopic":"323-740","subtopic_title":"Income Taxes—Proportional Amortization Method","section":{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":"Proportional Amortization Method","heading":null,"paragraphs":[{"citation":"323-740-25-1","para":"25-1","html":"
A reporting entity that invests in projects that generate income tax credits and other income tax benefits from a tax credit program through limited liability entities (that is, the investor) may elect to account for those investments using the proportional amortization method (described in paragraphs 323-740-35-2 and 323-740-45-2) if elected in accordance with paragraph 323-740-25-4, provided all of the following conditions are met:
  1. a
    It is probable that the income tax credits allocable to the investor will be available.
  2. aa
    The investor does not have the ability to exercise significant influence over the operating and financial policies of the underlying project.
  3. aaa
    Substantially all of the projected benefits are from income tax credits and other income tax benefits (for example, tax benefits generated from the operating losses of the investment). Projected benefits include, but are not limited to, income tax credits, other income tax benefits, and other non-income-tax-related benefits, including refundable tax credits (that is, those tax credits not dependent upon an investor’s income tax liability). Tax credits accounted for outside of the scope of Topic 740 (for example, refundable tax credits) shall be included in total projected benefits, but not in income tax credits and other income tax benefits when evaluating this condition. This condition shall be determined on a discounted basis using a discount rate that is consistent with the cash flow assumptions utilized by the investor for the purpose of making a decision to invest in the project.
  4. b
    The investor's projected yield based solely on the cash flows from the income tax credits and other income tax benefits is positive.
  5. c
    The investor is a limited liability investor in the limited liability entity for both legal and tax purposes, and the investor's liability is limited to its capital investment.
","snippet":"A reporting entity that invests in projects that generate income tax credits and other income tax benefits from a tax credit program through limited liability entities (that is, the investor) may elect to account for tho…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4244040f4f2e1636842e609f1b2df6c3bb1a540265a5dd2817026d3b79be14f2","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-1A","para":"25-1A","html":"
In determining whether an investor has the ability to exercise significant influence over the operating and financial policies of the underlying project, a reporting entity shall consider the indicators of significant influence in paragraphs
323-10-15-6 through 15-7
. In considering the operating and financial policies of the underlying project, the investor shall consider the operations, financial decisions, and related objectives of the project as a whole.
","snippet":"In determining whether an investor has the ability to exercise significant influence over the operating and financial policies of the underlying project, a reporting entity shall consider the indicators of significant in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b694bd1dfb1c15d561f4f261f0bfc88b6da3192b003d409a8216654f73475cb8","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-1B","para":"25-1B","html":"
Other transactions between the investor and the limited liability entity (for example, bank loans) shall not be considered when determining whether the conditions in paragraph 323-740-25-1 are met, provided that all three of the following conditions are met:
  1. a
    The reporting entity is in the business of entering into those other transactions (for example, a financial institution that regularly extends loans to other projects).
  2. b
    The terms of those other transactions are consistent with the terms of arm's-length transactions.
  3. c
    The reporting entity does not acquire the ability to exercise significant influence over the operating and financial policies of the underlying project as a result of those other transactions.
","snippet":"Other transactions between the investor and the limited liability entity (for example, bank loans) shall not be considered when determining whether the conditions in paragraph 323-740-25-1 are met, provided that all thre…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9edf0f7941753ff427ceca277509c7d726c2b0f042a87c919d9b20dcd5a8dd82","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-1C","para":"25-1C","html":"
At the time of the initial investment, a reporting entity shall evaluate whether the conditions in paragraphs 323-740-25-1 through 25-1B have been met to elect to apply the proportional amortization method on the basis of facts and circumstances that exist at that time. A reporting entity shall subsequently reevaluate the conditions upon the occurrence of either of the following:
  1. a
    A change in the nature of the investment (for example, if the investment is no longer in a flow-through entity for tax purposes)
  2. b
    A change in the relationship with the underlying project that could result in the reporting entity no longer meeting the conditions in paragraphs 323-740-25-1 through 25-1B.
","snippet":"At the time of the initial investment, a reporting entity shall evaluate whether the conditions in paragraphs 323-740-25-1 through 25-1B have been met to elect to apply the proportional amortization method on the basis o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e99eb47798b55adc776a2a6d93d33bdfa02eecb5825ef5cd615522eb1a5034f5","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-2","para":"25-2","html":"
Paragraph superseded by Accounting Standards Update No. 2023-02.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2023-02.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7515ba7c5b40e411bca84e83e3611d1a60adb49bcef775e0d0e990589d6c2ff3","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-2A","para":"25-2A","html":"
Paragraph superseded by Accounting Standards Update No. 2023-02.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2023-02.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c59b0e04414156bae0ed20c6b7168ba71322ef21bfe57b3dc87d97b229b6e336","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-3","para":"25-3","html":"
A liability shall be recognized for delayed equity contributions that are unconditional and legally binding. A liability also shall be recognized for equity contributions that are contingent upon a future event when that contingent event becomes probable. Topic 450 and paragraph 842-50-55-2 provide additional guidance on the accounting for delayed equity contributions.
","snippet":"A liability shall be recognized for delayed equity contributions that are unconditional and legally binding. A liability also shall be recognized for equity contributions that are contingent upon a future event when that…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6de1ebe68efacf3473465447f8ed8c0b142298fb2f83a242581aae0319f4ccfa","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-4","para":"25-4","html":"
The decision to apply the proportional amortization method is an accounting policy decision to be elected on a tax-credit-program-by-tax-credit-program basis that shall be applied consistently to all investments within an elected tax credit program that meet the conditions in paragraph 323-740-25-1 rather than a decision to be applied to individual investments that meet the conditions in paragraph 323-740-25-1.
","snippet":"The decision to apply the proportional amortization method is an accounting policy decision to be elected on a tax-credit-program-by-tax-credit-program basis that shall be applied consistently to all investments within a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0fb4cb6fc966091becf34982f448bd5a9784899a0d6c922aa6e1fb2bc0cb3e83","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-5","para":"25-5","html":"
An entity shall recognize income tax credits in the period that they are allocated to the investor for tax purposes. Unless all income tax credits are allocated to the investor at the date of initial investment, immediate recognition of the entire benefit of the income tax credits to be received during the term of an investment that generates income tax credits and other income tax benefits from a tax credit program is not permitted (that is, income tax credits shall not be recognized in the financial statements before the year in which the credit arises).
","snippet":"An entity shall recognize income tax credits in the period that they are allocated to the investor for tax purposes. Unless all income tax credits are allocated to the investor at the date of initial investment, immediat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fbe161aef1ba6e61ce44bed985bcc19b109b791cab84ec10d21c691468cfffc4","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},{"citation":"323-740-25-6","para":"25-6","html":"
Example 1 (see paragraph 323-740-55-2) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits and other income tax benefits from a tax credit program. Example 2 (see paragraph 323-740-55-11) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits, other income tax benefits, and non-income-tax-related benefits from a tax credit program.
","snippet":"Example 1 (see paragraph 323-740-55-2) illustrates the application of the proportional amortization method to a limited partnership investment that generates income tax credits and other income tax benefits from a tax cr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eecec0bfe2531dd4b50b2310a9d8251e4ec5691a8e6c2bfc5620fe6a85e9632e","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b3b4c8591ece49e4f00abbfb63bea1722f30122bcb96737ba6aa8c671783b3b5","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f1df001e724816b66d881d5c56e6b91d20fa2c0350e7ea6c61cfcb06376472cf","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f1df001e724816b66d881d5c56e6b91d20fa2c0350e7ea6c61cfcb06376472cf","downloaded_from":"2026-09-09T23:41:15.826Z","last_downloaded_at":"2026-09-09T23:41:15.826Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478758","source_sha256":"ac89d89093d6ca096b3550f7fbf6e4f20f30a02d0258a20da6f14157a296f332"}}